2010 (12) TMI 992 - AT - Central Excise

Supreme Court Upholds Penalty for Tax Exemption Violation

The Supreme Court dismissed the appeal against the demand confirmation and penalty imposition due to the Appellant's failure to provide sufficient ... Penalty - denial of benefit of SSI exemption - as per CCE v. M.P.V. & Engg. Industries [2003 (3) TMI 107 - SUPREME COURT OF INDIA] the manufacturer is entitled for the benefit of the SSI exemption Notification from the date of application, in pursuance to which the registration has been granted - Held that:- Appellant produced a copy of the application which was filed in February, 1988, on which no date has been mentioned. Even second application was made sometime in February/March, 1988. The Certificate of Registration was granted on 31-3-88. Therefore, in absence of the date on which the application is submitted, it is difficult to say that the Appellant are entitled for the benefit of SSI exemption Notification from which date. As there is no evidence produced by appellant regarding date of second application, hence, the appellants are entitled for the benefit of Notification from the date of registration i.e. 31-3-88, Appellant failed to produce any evidence in support of their claim, penalty of Rs. 1.00 lakh has been imposed only on the ground that the Appellant had wrongly availed the benefit of the SSI exemption Notification. As held that the Appellant are entitled for the benefit of Notification with effect from 31-3-88, therefore no ground to interfere with the quantum of penalty imposed on the Appellant. Therefore, the Appeal is dismissed. Issues:1. Appeal against demand confirmed and penalty imposed after denying small-scale exemption Notification.2. Verification of application dates for provisional and permanent registration.3. Entitlement for small-scale exemption Notification benefits from a specific date.4. Imposition of penalty based on wrongful availment of exemption.Analysis:1. The Appellant filed an Appeal against an Order confirming a demand and imposing a penalty for denying the benefit of a small-scale exemption Notification. The Appellant, engaged in manufacturing cooling towers, had availed the exemption since production began in June 1986. However, Revenue Officers found discrepancies and issued a show cause notice leading to the confirmation of demand and penalty imposition by the Adjudicating Authority. The Tribunal initially allowed the Appeal based on the Appellant's provisional registration application date. The matter was then remanded by the Supreme Court for factual verification.2. The key issue revolved around the dates of application for provisional and permanent registration by the Appellant. The Commissioner found that the Appellant failed to provide evidence of provisional registration acceptance or continuity between the two registration applications. The Appellant claimed to have applied for provisional registration in December 1986, followed by permanent registration in February 1988. However, the Revenue argued that the application for permanent registration did not indicate any prior registration or provisional application, casting doubt on the Appellant's claims.3. The Supreme Court emphasized that entitlement to the exemption Notification starts from the registration application date. The Appellant's failure to substantiate the continuity between the two registration applications led to a lack of clarity on the effective date for exemption benefits. Without concrete evidence of the second application date, the Appellant's entitlement was determined from the date of registration, i.e., 31st March 1988, as per the granted Certificate of Registration.4. Regarding the penalty imposed for wrongful availment of the exemption, the Tribunal upheld the penalty of Rs. 1.00 lakh since the Appellant could not provide sufficient evidence to support their claim. As the Appellant was deemed entitled to the exemption benefits from 31st March 1988, there was no basis to interfere with the penalty decision. Consequently, the Appeal was dismissed based on the lack of evidence supporting the Appellant's claims and the entitlement date for the exemption benefits.